The current financial crisis is severe, with serious problems developing in Germany and France.
The crises in Germany and France, however, are interrelated and part of the same catastrophe. This problem is the result of the European Union and its institutions imposing themselves on Europe's national economies. The EU is causing a variety of issues and difficulties, which is why Germany and France are currently in crisis.
The media and newspapers are reporting on the problem at Deutsche Bank, which has been covertly bailed out many times and is experiencing deposit runs and decreasing stock prices. Although officials such as Olaf Schultz and Christine Lagarde maintain there is no cause for concern, the situation remains volatile, and even if Deutsche Bank is well-managed, a bank run can quickly escalate out of hand.
Because Deutsche Bank is an EU bank and Germany is at the heart of the EU, the German financial system's crisis has consequences for the entire EU.
Their next steps remain unknown, but they will have some breathing room over the weekend. Weekends, on the other hand, can be dangerous since stories can spread out of control, causing individuals to panic and withdraw their deposits.
If the situation at Deutsche Bank is not resolved by Monday, authorities will be forced to intervene to prevent it from worsening. Despite this, it is evident that the German government, the EU Commission, and the European Central Bank will not let Deutsche Bank fail, and they will act rapidly to assist the bank.
Supporting Deutsche Bank over the weekend, on the other hand, may weaken the entire system and generate new issues, such as increased yields on German bonds and concerns about the safety of investing in Germany.
Allowing a bank to become "too big to fail" is a risky condition for the economy, and the fact that Deutsche Bank is in this position is troubling. This is an issue not just for Germany and the European Union, but also for smaller banks and the economy as a whole.
Similarly, the recent UBS Credit Suisse merger has created a large bank that, if it fails, might cause problems for Switzerland's economy. Credit Suisse was rumoured to be dissolved and sold off to UBS, but the Saudis and Gulf States threatened to withdraw their deposits if this happened.
If problems at Deutsche Bank spread to other German banks, it might spark a banking crisis that would harm the whole German economy. This might lead to people losing faith in the economy and withdrawing their deposits, which would be disastrous.
To sum up, the current financial crisis is a major issue that affects not only Germany and France, but the entire European Union. The predicament with Deutsche Bank is just one example of the crisis's interconnection and complexity, emphasising the risks of permitting a bank to grow "too large to fail." While authorities are expected to intervene to prevent the situation from worsening, the uncertainty surrounding this issue emphasises the need for improved financial industry regulation and oversight. As we navigate these turbulent waters, it is critical to be educated and strive towards solutions that will help ensure the stability and resilience of our economy.
Source:
The Duran, 26 March 2023, "Deutsche Bank, too big to fail",